Is $1.1 Billion Transaction in Bitcoin That Big of a Deal?
As it became known, the mysterious party that had transferred 124 946.6 BTC proved to be BitFinex. According to the exchange’s CTO Paolo Ardoino, the transaction was but a part of transferring 150 thousand BTC to the company’s hot wallet.
— Paolo Ardoino (@paoloardoino) January 15, 2020
The change of address means that nobody can spend funds stored there until the transaction is fully confirmed. It took 40 minutes to get 6 confirmations in the blockchain. This created the network’s second-biggest address topped only by Huobi’s cold wallet storing 255 502 BTC.
Reports state that the transaction fee comprised 0.0096 BTC ($80), which is relatively high. Notably, the transaction data in the blockchain shows a fee of 0.00005578 BTC. For comparison, a SegWit transaction of 40 000 BTC ($230 million at the time) in May 2019 was worth 0.0001 BTC or $0.57.
BitFinex’s transaction prompted @Rhythmtrader to praise the “true power of bitcoin” that no bank could match.
124,946 bitcoin were just moved in a transaction.
That's ~$1,100,000,000 transfered for an $80 fee.
No government, bank or third party had to verify the transaction, nor could they have stopped it if they wanted to.
The true power of bitcoin. ?
— Rhythm (@Rhythmtrader) January 14, 2020
The transaction in question is, of course, large and noteworthy. But, although everything may seem fine, there are alarming conclusions to make.
We’ve asked our expert Tikhon Skudarnov, the CEO of a private digital assets fund, to comment on the matter. He believes that this news has three particular points to unpack.
Banks can’t do it
The most obvious point really has something to do with the “true power of Bitcoin.”
“Such numbers are out of reach for fiat currencies. The only exception is when a bank moves money internally between accounts of a single entity within a single jurisdiction. Such a transaction would make no economic sense whatsoever. This may be the actual reason why the transaction would be allowed to occur quickly and cheaply. Just saying.”
This isn’t a record-breaking transaction for Bitcoin
In 2011 there was a transaction of 500 thousand BTC, and a more modest sum of 195 thousand BTC was transferred in 2013. Tikhon noted that both sums changed hands with zero fees, as, it seems, the senders were the ones who processed the transactions.
He also believes that the technological superiority of Bitcoin is not as absolute as some of us wish it was.
“Moreover, modern cryptocurrencies can process a similar transaction faster, while being cheaper and more reliable. Some of them can even make it anonymous. These new systems are superior to Bitcoin, just like Bitcoin is superior to traditional banks.”
Somebody has the power to move a billion dollars’ worth of users’ BTC whenever they’d like
Finally, Tikhon notes that the very fact of the existence of such big transactions may bring trouble.
“The funds you send to centralized exchanges are controlled by people. Not by the platform, but by a few people holding the keys. It isn’t your crypto, if you don’t own the key. People hand over their money to strangers voluntarily, hoping they will get it back. Sure, there are procedures and codes of conduct, but it all comes down to regular people.”
A bank employee may have similar power over the money, he added. Yet, a bank transaction can be canceled, while in Bitcoin this isn’t the case.
Ironically, Bitcoin was conceived to remove the very need in financial institutions but instead became a speculation asset that financial institutions willingly use.
He concluded that hacks and scams are not exceptions or abnormalities. They are inherent to the modern-day cryptocurrency infrastructure and will continue as long as it relies on custodial services and concentrates user funds on private addresses.
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